Retirement Income

Reserve Bank of Australia issues stern warning to homeowners

The Reserve Bank of Australia (RBA) has issued a stern warning to homeowners and mortgage holders that rising interest rates may hurt their hip pockets.

RBA’s governor Philip Lowe issued the warning on Tuesday, saying that it's been eight years since the last interest rate hike and that “borrowers have never experienced a rise in official interest rates”.

“Over recent times the Australian economy has been improving,’’ he said.

“This is good news.

“If we continue on this current improving track as we expect we will it is likely that the next move in official interest will be up, not down.”

The RBA has kept the interest rate on hold at 1.5 per cent since August 2016.

Mr Lowe said his advice to borrowers was to “make sure” they are in a good financial position for interest rates hike.

The RBA is expected to increase interest rates in the second half of 2019, depending on inflation rates and the job market, the Financial Review reported.

Mr Lowe also said homeowners should not assume the value of their homes will continue to rise.

“Most of our cities have seen falls in housing prices at some point over the past decade,” he said.

“While I would expect housing prices to trend higher over time as our incomes increase, there is no guarantee that your home will be worth more tomorrow than it is today.